Power industry professionals remain to be convinced about the credibility of renewables, yet are being urged to adapt to what some analysts maintain is inevitable, unstoppable change in the sector.

That scepticism was perfectly encapsulated during the Financial Times Energy Transformation Strategies event in London, when speakers questioned the data surrounding renewable penetration and the ability of wind and solar power to replace baseload capacity.

Philip Lambert, CEO of Lambert Energy Advisory and former adviser to Statoil told the gathering last week he had never seen ‘so little confidence in the industry, along with a draining of investment and support’ despite suspicion that renewables weren’t yet proven to be reliant in powering economies.
Dr Abdelkader Amara, Moroccan Minister for Energy
“The greatest risk to the world economy today is that the (fossil power) sector becomes so battered that it doesn’t invest enough to maintain. There is a populist belief in renewables but are we considering the unbelievable risk of holding that position?”

Lambert said a ‘true carbon audit’ would gauge if renewables were ready to replace baseload.

“We may destroy a system without something sustainable in the aftermath.”

“The International Energy Agency’s rigour on cost audits is not good enough at the moment. If you really think the world can move from a baseload system to one running completely on intermittent without battery technology evolving to a huge degree that is monumentally dangerous.”

German Paradox

To illustrate his point he said Germany, the ‘high priest of this movement, had installed the equivalent of a million barrels of oil a day of renewable capacity, between solar and onshore wind.

“Solar is working at 50,000 a barrels a day and 10 per cent utilisation, wind is at 70,000 barrels a day – 17 per cent utilisation – so that million barrel a day field is working at a 130,000 barrels a day. You cannot replace baseload with intermittent and promise the people it’s going to work.”

“The Germans were promised this would all be worthwhile because it would reduce carbon dramatically. Yet their carbon emissions per capita are 40 per cent above the UK, France and Italy.”

Lambert drew attention to May 9th, the first day in generations that UK was powered completely without coal by pointing out that on that same day Germany generated 75 per cent of its electricity through coal and lignite.”

Scott Foster, Director Sustainable Development Division, United Nations Economic Commission for Europe, told the audience there was no point, in energy and environment terms, of setting up an adversarial relationship between fossil and renewable power.

“Simply to say fossil is evil, that we have to move on to renewables is wrong. Renewables can’t deliver the quality of life that fossil can deliver. It’s a mistake to look at it as renewables versus fossil, and we’ve got to think about the sustainable energy system of the future. Fossil has got an important role to play in that. It’s not an either/or decision – every technology has a role to play.”

“We have to define what we mean by fair around the world as there is quality of life aspirations and if we are going to put a carbon price in and make fossils more expensive are those countries who are able to pay for it prepared to pay for investment in parts of the world with different priorities.”

Benjamin Sporton, Chief Executive of the World Coal Association, said many countries, particularly in Asia planned to use coal for many decades, even going so far as to include low emission coal technologies as part of their Intended Nationally Determined Contributions submitted at Paris.

Additionally, the IEA, in their new policy scenario in ensuring the Paris commitments are implemented, predict a growth in electricity from coal of about 24 per cent between now and 2040.

Wishing Coal Out Of The Energy Mix

“If we ignore that and pretend coal and fossil fuels in general are going to go away we risk not achieving climate targets by not focusing on the right kind of technologies need to reduce emissions from all fossil fuels in particularly coal,” said Sporton who pointed to the reality in Asia.
Ben Sporton of World Coal Association
“India is trying to drive its economy through electrification and has something like 290 GW of new coal fired power generation in the planning pipeline or under construction. That’s at the same time that about 190 GW of renewable capacity is on that pipeline.”

“We can’t wish coal out of the energy mix- we need to think about how to treat coal as part of the energy mix but recognise we need to do something about how we can reduce emissions from coal to meet our climate target. If we don’t invest in low emissions coal technology we’re not going to meet our climate target – it’s as simple as that.”

The gathering heard that there are currently in the region of 700 large modern coal plants all across Asia that still have decades to go, with around 400 billion tonnes of coal reserves under China alone, and another 100bn tonnes under India.

Laszlo Varro, Chief Economist at the International Energy Agency said ignoring those facts served to ignore political realities.

“Any government will regard those domestic energy resources as a strategic asset and it’s extremely difficult to see them voluntarily agree not to use their domestic coal resources. So we (IEA) think that carbon capture and storage retrofitting of the Asian coal fleet is definitely part of the solution.”

To indicate the difficulty he envisaged in renewables presiding over a complete fossil phase out, Varro said one only had to look at the construction industry.

“Urbanisation is growing at the rate of a city the size of London each month. This is steel, cement glass and plastics, all the energy-intensive commodities – there is no technical possibility yet to manufacture cement with solar power – it has to be done in the old school way.”

In a session at the same event, the industry was advised by various speakers to the perils of ignoring the accelerated rate of transformation taking place.

Culturally Incapable Of Change

Paul Gilding, author of ‘The Great Disruption’ and adviser on sustainability, said a delusional mentality will sink businesses who are incapable of adapting to the new paradigm.

“The risk to the fossil fuel industry is not climate change, it’s not the transition to low carbon energy, that can be managed and you can work out that – the risk to the industry is to see yourself in the existing culture, to see yourself as what you are today rather than what you can become because you will miss the speed and disruptive nature of the change.”

Gilding expressed a bleak view as to the prospects of most companies in the fossil space coping with the dynamic changes being faced, saying that culturally they are incapable of acting quickly enough.

“There is an enormous amount of delusion inside the industry. There has been for a very long time and delusion is valued very poorly by the market. Delusion is an invitation for the fast to eat the slow. That lack of understanding of how the world operates is the fundamental threat to the industry.”

Commenting on the perspective held in the earlier debate among those sceptical of the renewable revolution, Gilding said their belief in fossils as the underpinning of the future of the economy no longer held up.

“The lack of faith in human ingenuity from some of the world’s biggest capitalists is breath taking.”

“Energy is the essential to the future of the economy. Energy is the thing that underpins economic growth and will address poverty  and the market and technology has come to a point where it says we the market have got a better way of producing energy so you guys are no longer the fundamental underpinning of the economy. You are in a process of dramatic transformational change that you can’t see in front of you. To misquote Douglas Adams in Hitchhikers Guide to the Galaxy – so long and thanks for all the energy!”

Viren Doshi, energy consultant at PwC reinforced that narrative by warning of a tipping point, the world on the cusp of an energy transformation megatrend it would be wise to heed.

To sum up, the polarisation of opinion heard at the event could not be starker.

Cristof Ruhl, Global Head of Research at Abu Dhabi Investment Authority, and former chief economist at BP crystallised what the renewables sceptics in the audience felt, when he proposed that lobbying be left out of the equation, with hard facts more preferable.

“It is important to take the advocacy out of the debate and get numbers clear because otherwise we will really fail to address this. If you look at the numbers, renewables provide about 3 per cent of the global energy mix- Even should that grow by 8- 10 per cent they will not dominate the system 20 years from today, short of a major technological breakthrough falling from the sky.”

“The 2 per cent target cannot be achieve bar a collapse in the world economy,” he added.


*Other speakers at the Financial Times event included Dr Abdelkader Amara, Morocco’s energy minister and Francesco Starace, CEO Enel.